Stocks Notch Broad Gains

By

Jonathan Cheng

Updated Nov. 28, 2012 11:56 a.m. ET

U.S. stocks reversed course to finish with broad-based gains, as investors seized on upbeat political remarks on the fiscal negotiations in Washington, and signs that the Federal Reserve could continue buying bonds next year.

Stocks reversed course to finish with broad-based gains, as investors seized on upbeat political remarks on the fiscal negotiations in Washington, and signs that the Federal Reserve could continue buying bonds next year. Barrons's Brendan Conway has details on The News Hub. Photo: Bloomberg.

Why are the markets selling off? Markets were up 100 points before dropping down again, as news of fiscal cliff talks percolated. Steven Russolillo joins Markets Hub with an update on what to watch for. Photo: AP.

All 10 sectors of the S&P 500 were higher on a day that started with all of those sectors in the red. Leading the gains were consumer discretionary and energy stocks. Hewlett-Packard led the Dow advancers. Chevron and American Express also rose.

Consumer confidence rises to the highest level in more than four years, and the Dow loses 89 points. Is the market crazy? Mark Hulbert discusses on Markets Hub. Photo: AP.

Political and monetary-policy developments in Washington drove trading one day after Senate Majority Leader Harry Reid said there had been little progress in Congressional negotiations, helping push the Dow down 89 points, or 0.7%, on Tuesday.

On Wednesday, Erskine Bowles, the co-chairman of a high-profile fiscal commission, expressed pessimism about a deal to avoid the fiscal cliff. That sent stocks to their day's lows, with the Dow off 113 points at its nadir.

Just minutes later, however, House of Representatives Speaker John Boehner said he was optimistic about a deal. That helped stocks pare their losses.

Later in the trading day, President Barack Obama said he was hopeful that the White House and Congress could act to resolve the fiscal cliff before Christmas, urging the public to put pressure on their Congressional representatives.

"The markets want to believe that a deal will be struck. How lasting this deal would be—could it be a six-month or a 12-month deal—we don't know, but the markets are starting to lean in the direction of some sort of an agreement," said Myles Zyblock, chief institutional strategist for RBC Capital Markets in Toronto.

In the final half hour of trading, The Wall Street Journal reported that the Fed will likely continue buying long-term mortgage-backed and Treasury bonds in 2013, pushing stocks on another leg higher.

Data on new home sales for October, meantime, missed estimates as the previous month's figures were revised downward, a sign that the housing recovery remains uneven. The Federal Reserve's "beige book" report of economic conditions described a "measured pace" of economic expansion across the country.

European markets recouped morning losses to finish with slight gains. The Stoxx Europe 600 inched up 0.1%. The region's markets were buoyed by a well-received Italian debt auction in which six-month Treasury bills were sold at the lowest average yield since April 2010. Separately, the European Union approved restructuring plans for four Spanish lenders, which will allow the lenders to receive funding from the European Stability Mechanism.

Crude oil futures pared their losses but still traded about 0.8% lower to settle at $86.49 a barrel, while gold gave up 1.5% to settle at $1,716.50 an ounce. Some traders linked the sudden drop in gold prices, which came at about 8:30 a.m. EST, to a monthly rotation of futures contracts that may have been tripped up by the Thanksgiving holiday. The fall in gold prices was followed by a similar slide in oil prices about half an hour later.

The dollar rose against the euro but fell against the yen. Demand for Treasurys rose, sending the yield on the benchmark 10-year note down to 1.616%.

In corporate news, shares of Costco Wholesale rallied to lead the S&P 500 components after the wholesale-club operator said it will pay a special dividend of $7 a share and reported November same-store sales that beat expectations.

Knight Capital Group surged on an offer from high-speed trading firm Getco for $3.50 a share in cash and stock. Later in the day, Virtu Financial LLC and its advisers privately submitted an all-cash offer Wednesday morning that would pay Knight shareholders about $3 a share upfront and would transform Knight into a privately owned company combined with Virtu, according to a report in The Wall Street Journal, citing people familiar with the negotiations.

Groupon advanced after The Wall Street Journal reported that the company's board of directors would meet Thursday to discuss whether to begin a search for a new chief executive, citing a person briefed on the matter. Chief executive Andrew Mason said later in the day that he remains the right person to run the daily-deals site, and acknowledged there have been "bumps in the road."

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